Bailout plan: hot off the press

[kev374]

-Minimum 660 FICO requirement

-No more than 60 days past due on payments

-Must have at least 3% equity

This bailout is an eyewash. If a buyer had an exotic loan or teaser rate ARM it’s almost certain they haven’t built any equity!!

And there is an additional requirement that the purchase must be post 2005. Since that time housing values have only gone down so almost 100% of these people are upside down. Any equity requirements rules them out completely!

[drunkle]

it’s optional for the lenders to do this. this plan has no teeth.

the determination of whether or not a homeowner can afford to continue payments on a frozen basis will require documentation, ie., w2. how many “homeowners” bought using a w2?

the people who can afford it are not the people that need help, obviously. if anything, this plan is to get ignorant investors back into the financial stocks to prolong the life of the banks, allow hedgies to buy shorts, etc.

[drunkle]

it’s optional for the lenders to do this. this plan has no teeth.

the determination of whether or not a homeowner can afford to continue payments on a frozen basis will require documentation, ie., w2. how many “homeowners” bought using a w2?

the people who can afford it are not the people that need help, obviously. if anything, this plan is to get ignorant investors back into the financial stocks to prolong the life of the banks, allow hedgies to buy shorts, etc.

[drunkle]

it’s optional for the lenders to do this. this plan has no teeth.

the determination of whether or not a homeowner can afford to continue payments on a frozen basis will require documentation, ie., w2. how many “homeowners” bought using a w2?

the people who can afford it are not the people that need help, obviously. if anything, this plan is to get ignorant investors back into the financial stocks to prolong the life of the banks, allow hedgies to buy shorts, etc.

[drunkle]

it’s optional for the lenders to do this. this plan has no teeth.

the determination of whether or not a homeowner can afford to continue payments on a frozen basis will require documentation, ie., w2. how many “homeowners” bought using a w2?

the people who can afford it are not the people that need help, obviously. if anything, this plan is to get ignorant investors back into the financial stocks to prolong the life of the banks, allow hedgies to buy shorts, etc.

[drunkle]

it’s optional for the lenders to do this. this plan has no teeth.

the determination of whether or not a homeowner can afford to continue payments on a frozen basis will require documentation, ie., w2. how many “homeowners” bought using a w2?

the people who can afford it are not the people that need help, obviously. if anything, this plan is to get ignorant investors back into the financial stocks to prolong the life of the banks, allow hedgies to buy shorts, etc.

[LA_Renter]

I found this on the KBH chatboard. The poster was heavily involved in S&L crisis in the 80’s. He found this quote on Calculated Risk, anyway I found this to be very interesting. The first paragraph is from the poster the following paragraphs are from the former FDIC examiner.

“From Calculated Risk comments, from former FDIC examiner:

A former FDIC employee sent these comments out today. I try to place value in comments from people like this who actually worked to clean up the S&L Bank crisis we felt in 1980s Texas.

____

One of the things they are leaving out of this story about the sub-prime rate freeze is that the owners of the debt (sub-prime mortgages or anything tainted by sub-prime such as mortgage backed securities) are NO LONGER required to re-price these assets on a monthly or quarterly basis as has been the case. The balance sheets in question will no longer reflect market value. This will allow institutions to hold securities of unknown value on their books without any valuation reserve or write-down (Regulations on the freeze action have not been released). This is exactly what the Japanese banks did in the 90’s when they did not quickly clean up their balance sheets and deal with the problem, and many of them still have bad debt from the late 80’s on their books. SO, the result of this is that there will be a ticking time bomb in the banking / financial system AGAIN.

This action is too late to make any real impact on the housing problem. Real estate prices everywhere have already fallen and will continue to do so until there is something of a more normal relationship between real estate prices and their historic place in the proverbial “basket of goods”. Again, the last time real estate markets peaked in the middle of the decade was in the 1920’s (1925 to be exact) and they did not begin to level out until 1934 and not rise until the early 1940’s. Today’s action only moves off the inevitable day of dealing with these underwater loans and thereby creates a longer-term problem than would otherwise be the case. This freeze requires homeowners to have 3% equity in their property in order to qualify, as prices continue to decline this will be fewer and fewer. Unfortunately, the ball has already gone over the edge of the building

This action is very similar to the actions taken in the early part of the S&L disaster when the sick institutions were allowed to keep “goodwill” on their balance sheets and classify it as core capital… and we all remember where that mess ended up. Not dealing with real problems in the financial and banking systems always ends in disaster eventually. However, it allows those in power a quick fix and allow them to pass the problem on the next administration to deal with… Regan did it to old Bush and now little Bush is doing it to whomever…

Earnings at the financial institutions will appear to be significantly improved soon as they will not have to make any of those HUGE (billions of dollars) write-downs on their portfolios any time soon, but they will come.”

[LA_Renter]

I found this on the KBH chatboard. The poster was heavily involved in S&L crisis in the 80’s. He found this quote on Calculated Risk, anyway I found this to be very interesting. The first paragraph is from the poster the following paragraphs are from the former FDIC examiner.

“From Calculated Risk comments, from former FDIC examiner:

A former FDIC employee sent these comments out today. I try to place value in comments from people like this who actually worked to clean up the S&L Bank crisis we felt in 1980s Texas.

____

One of the things they are leaving out of this story about the sub-prime rate freeze is that the owners of the debt (sub-prime mortgages or anything tainted by sub-prime such as mortgage backed securities) are NO LONGER required to re-price these assets on a monthly or quarterly basis as has been the case. The balance sheets in question will no longer reflect market value. This will allow institutions to hold securities of unknown value on their books without any valuation reserve or write-down (Regulations on the freeze action have not been released). This is exactly what the Japanese banks did in the 90’s when they did not quickly clean up their balance sheets and deal with the problem, and many of them still have bad debt from the late 80’s on their books. SO, the result of this is that there will be a ticking time bomb in the banking / financial system AGAIN.

This action is too late to make any real impact on the housing problem. Real estate prices everywhere have already fallen and will continue to do so until there is something of a more normal relationship between real estate prices and their historic place in the proverbial “basket of goods”. Again, the last time real estate markets peaked in the middle of the decade was in the 1920’s (1925 to be exact) and they did not begin to level out until 1934 and not rise until the early 1940’s. Today’s action only moves off the inevitable day of dealing with these underwater loans and thereby creates a longer-term problem than would otherwise be the case. This freeze requires homeowners to have 3% equity in their property in order to qualify, as prices continue to decline this will be fewer and fewer. Unfortunately, the ball has already gone over the edge of the building

This action is very similar to the actions taken in the early part of the S&L disaster when the sick institutions were allowed to keep “goodwill” on their balance sheets and classify it as core capital… and we all remember where that mess ended up. Not dealing with real problems in the financial and banking systems always ends in disaster eventually. However, it allows those in power a quick fix and allow them to pass the problem on the next administration to deal with… Regan did it to old Bush and now little Bush is doing it to whomever…

Earnings at the financial institutions will appear to be significantly improved soon as they will not have to make any of those HUGE (billions of dollars) write-downs on their portfolios any time soon, but they will come.”

[LA_Renter]

I found this on the KBH chatboard. The poster was heavily involved in S&L crisis in the 80’s. He found this quote on Calculated Risk, anyway I found this to be very interesting. The first paragraph is from the poster the following paragraphs are from the former FDIC examiner.

“From Calculated Risk comments, from former FDIC examiner:

A former FDIC employee sent these comments out today. I try to place value in comments from people like this who actually worked to clean up the S&L Bank crisis we felt in 1980s Texas.

____

One of the things they are leaving out of this story about the sub-prime rate freeze is that the owners of the debt (sub-prime mortgages or anything tainted by sub-prime such as mortgage backed securities) are NO LONGER required to re-price these assets on a monthly or quarterly basis as has been the case. The balance sheets in question will no longer reflect market value. This will allow institutions to hold securities of unknown value on their books without any valuation reserve or write-down (Regulations on the freeze action have not been released). This is exactly what the Japanese banks did in the 90’s when they did not quickly clean up their balance sheets and deal with the problem, and many of them still have bad debt from the late 80’s on their books. SO, the result of this is that there will be a ticking time bomb in the banking / financial system AGAIN.

This action is too late to make any real impact on the housing problem. Real estate prices everywhere have already fallen and will continue to do so until there is something of a more normal relationship between real estate prices and their historic place in the proverbial “basket of goods”. Again, the last time real estate markets peaked in the middle of the decade was in the 1920’s (1925 to be exact) and they did not begin to level out until 1934 and not rise until the early 1940’s. Today’s action only moves off the inevitable day of dealing with these underwater loans and thereby creates a longer-term problem than would otherwise be the case. This freeze requires homeowners to have 3% equity in their property in order to qualify, as prices continue to decline this will be fewer and fewer. Unfortunately, the ball has already gone over the edge of the building

This action is very similar to the actions taken in the early part of the S&L disaster when the sick institutions were allowed to keep “goodwill” on their balance sheets and classify it as core capital… and we all remember where that mess ended up. Not dealing with real problems in the financial and banking systems always ends in disaster eventually. However, it allows those in power a quick fix and allow them to pass the problem on the next administration to deal with… Regan did it to old Bush and now little Bush is doing it to whomever…

Earnings at the financial institutions will appear to be significantly improved soon as they will not have to make any of those HUGE (billions of dollars) write-downs on their portfolios any time soon, but they will come.”

[LA_Renter]

I found this on the KBH chatboard. The poster was heavily involved in S&L crisis in the 80’s. He found this quote on Calculated Risk, anyway I found this to be very interesting. The first paragraph is from the poster the following paragraphs are from the former FDIC examiner.

“From Calculated Risk comments, from former FDIC examiner:

A former FDIC employee sent these comments out today. I try to place value in comments from people like this who actually worked to clean up the S&L Bank crisis we felt in 1980s Texas.

____

One of the things they are leaving out of this story about the sub-prime rate freeze is that the owners of the debt (sub-prime mortgages or anything tainted by sub-prime such as mortgage backed securities) are NO LONGER required to re-price these assets on a monthly or quarterly basis as has been the case. The balance sheets in question will no longer reflect market value. This will allow institutions to hold securities of unknown value on their books without any valuation reserve or write-down (Regulations on the freeze action have not been released). This is exactly what the Japanese banks did in the 90’s when they did not quickly clean up their balance sheets and deal with the problem, and many of them still have bad debt from the late 80’s on their books. SO, the result of this is that there will be a ticking time bomb in the banking / financial system AGAIN.

This action is too late to make any real impact on the housing problem. Real estate prices everywhere have already fallen and will continue to do so until there is something of a more normal relationship between real estate prices and their historic place in the proverbial “basket of goods”. Again, the last time real estate markets peaked in the middle of the decade was in the 1920’s (1925 to be exact) and they did not begin to level out until 1934 and not rise until the early 1940’s. Today’s action only moves off the inevitable day of dealing with these underwater loans and thereby creates a longer-term problem than would otherwise be the case. This freeze requires homeowners to have 3% equity in their property in order to qualify, as prices continue to decline this will be fewer and fewer. Unfortunately, the ball has already gone over the edge of the building

This action is very similar to the actions taken in the early part of the S&L disaster when the sick institutions were allowed to keep “goodwill” on their balance sheets and classify it as core capital… and we all remember where that mess ended up. Not dealing with real problems in the financial and banking systems always ends in disaster eventually. However, it allows those in power a quick fix and allow them to pass the problem on the next administration to deal with… Regan did it to old Bush and now little Bush is doing it to whomever…

Earnings at the financial institutions will appear to be significantly improved soon as they will not have to make any of those HUGE (billions of dollars) write-downs on their portfolios any time soon, but they will come.”

[LA_Renter]

I found this on the KBH chatboard. The poster was heavily involved in S&L crisis in the 80’s. He found this quote on Calculated Risk, anyway I found this to be very interesting. The first paragraph is from the poster the following paragraphs are from the former FDIC examiner.

“From Calculated Risk comments, from former FDIC examiner:

A former FDIC employee sent these comments out today. I try to place value in comments from people like this who actually worked to clean up the S&L Bank crisis we felt in 1980s Texas.

____

One of the things they are leaving out of this story about the sub-prime rate freeze is that the owners of the debt (sub-prime mortgages or anything tainted by sub-prime such as mortgage backed securities) are NO LONGER required to re-price these assets on a monthly or quarterly basis as has been the case. The balance sheets in question will no longer reflect market value. This will allow institutions to hold securities of unknown value on their books without any valuation reserve or write-down (Regulations on the freeze action have not been released). This is exactly what the Japanese banks did in the 90’s when they did not quickly clean up their balance sheets and deal with the problem, and many of them still have bad debt from the late 80’s on their books. SO, the result of this is that there will be a ticking time bomb in the banking / financial system AGAIN.

This action is too late to make any real impact on the housing problem. Real estate prices everywhere have already fallen and will continue to do so until there is something of a more normal relationship between real estate prices and their historic place in the proverbial “basket of goods”. Again, the last time real estate markets peaked in the middle of the decade was in the 1920’s (1925 to be exact) and they did not begin to level out until 1934 and not rise until the early 1940’s. Today’s action only moves off the inevitable day of dealing with these underwater loans and thereby creates a longer-term problem than would otherwise be the case. This freeze requires homeowners to have 3% equity in their property in order to qualify, as prices continue to decline this will be fewer and fewer. Unfortunately, the ball has already gone over the edge of the building

This action is very similar to the actions taken in the early part of the S&L disaster when the sick institutions were allowed to keep “goodwill” on their balance sheets and classify it as core capital… and we all remember where that mess ended up. Not dealing with real problems in the financial and banking systems always ends in disaster eventually. However, it allows those in power a quick fix and allow them to pass the problem on the next administration to deal with… Regan did it to old Bush and now little Bush is doing it to whomever…

Earnings at the financial institutions will appear to be significantly improved soon as they will not have to make any of those HUGE (billions of dollars) write-downs on their portfolios any time soon, but they will come.”

[temeculaguy]

I don’t see how this will help the liquidity problem, it’s new rims with old tires. Why would any investor in the future buy mortgage backed securities if they are going to get strongarmed out of their profit, more risk, no reward. Within those pooled assets are a chunk of borrowers who will continue to make the payments at higher rates to offset a little of what the foreclosures cost them. Based on the critera, 660 fico, no lates, equity, they are being told to not make any money off of the best borrowers in the pool while those who don’t qualify are really the ones who will be foreclosing.

Almost every attempt in history to trick the invisible hand of economics has backfired, this will be no different. Where did Laize faire go? This is akin to a casino changing the rules in blackjack after I’ve bet and the cards have been dealt, telling me that I lose on a tie. They will do nothing other than ensuring I stop betting because they can’t be trusted. They may save a few people but they will make sure that private equity steers clear of anyone without stellar credit and large downpayments, while that is not a bad thing, it will hurt the very market they are trying to manipulate.

[temeculaguy]

I don’t see how this will help the liquidity problem, it’s new rims with old tires. Why would any investor in the future buy mortgage backed securities if they are going to get strongarmed out of their profit, more risk, no reward. Within those pooled assets are a chunk of borrowers who will continue to make the payments at higher rates to offset a little of what the foreclosures cost them. Based on the critera, 660 fico, no lates, equity, they are being told to not make any money off of the best borrowers in the pool while those who don’t qualify are really the ones who will be foreclosing.

Almost every attempt in history to trick the invisible hand of economics has backfired, this will be no different. Where did Laize faire go? This is akin to a casino changing the rules in blackjack after I’ve bet and the cards have been dealt, telling me that I lose on a tie. They will do nothing other than ensuring I stop betting because they can’t be trusted. They may save a few people but they will make sure that private equity steers clear of anyone without stellar credit and large downpayments, while that is not a bad thing, it will hurt the very market they are trying to manipulate.

[temeculaguy]

I don’t see how this will help the liquidity problem, it’s new rims with old tires. Why would any investor in the future buy mortgage backed securities if they are going to get strongarmed out of their profit, more risk, no reward. Within those pooled assets are a chunk of borrowers who will continue to make the payments at higher rates to offset a little of what the foreclosures cost them. Based on the critera, 660 fico, no lates, equity, they are being told to not make any money off of the best borrowers in the pool while those who don’t qualify are really the ones who will be foreclosing.

Almost every attempt in history to trick the invisible hand of economics has backfired, this will be no different. Where did Laize faire go? This is akin to a casino changing the rules in blackjack after I’ve bet and the cards have been dealt, telling me that I lose on a tie. They will do nothing other than ensuring I stop betting because they can’t be trusted. They may save a few people but they will make sure that private equity steers clear of anyone without stellar credit and large downpayments, while that is not a bad thing, it will hurt the very market they are trying to manipulate.

[temeculaguy]

I don’t see how this will help the liquidity problem, it’s new rims with old tires. Why would any investor in the future buy mortgage backed securities if they are going to get strongarmed out of their profit, more risk, no reward. Within those pooled assets are a chunk of borrowers who will continue to make the payments at higher rates to offset a little of what the foreclosures cost them. Based on the critera, 660 fico, no lates, equity, they are being told to not make any money off of the best borrowers in the pool while those who don’t qualify are really the ones who will be foreclosing.

Almost every attempt in history to trick the invisible hand of economics has backfired, this will be no different. Where did Laize faire go? This is akin to a casino changing the rules in blackjack after I’ve bet and the cards have been dealt, telling me that I lose on a tie. They will do nothing other than ensuring I stop betting because they can’t be trusted. They may save a few people but they will make sure that private equity steers clear of anyone without stellar credit and large downpayments, while that is not a bad thing, it will hurt the very market they are trying to manipulate.

[Author]

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